NEW YORK, July 6 (Reuters) – U.S. retail sales are expected to have risen in June due to warm weather and promotions tied to Father’s Day and the Memorial Day weekend, but the gains are seen as a temporary reprieve for retailers in an uncertain economy.
Retail chains ranging from Target Corp (TGT.N) to J.C. Penney Co (JCP.N) to Abercrombie & Fitch (ANF.N) will report sales at stores open at least year — a closely watched industry gauge known as same-store sales — on Wednesday and Thursday.
Analysts are expecting same-store sales to have risen 3.3 percent in June, compared with a drop of 4.9 percent last year, according to Thomson Reuters data.
Department stores such as Kohl’s Corp (KSS.N) and Nordstrom Inc (JWN.N) are expected to post some of the largest sales gains, after having some of the biggest declines last year, according to Thomson Reuters.
While a June increase would mark the tenth consecutive month of rising sales after a year of declines in the recession, analysts warn the road ahead could get rocky as retailers face a demanding consumer and tougher comparisons in the back half of the year.
“They (June sales) are still going to tell or reinforce what everybody wants to be a positive story and in so doing mask underlying weakness in retail,” Bryan Eshelman, managing director of AlixPartners’ retail practice said.
“The fundamentals are just not adding up to a recovery,” he said, referring to weakness in key indicators of economic strength like private sector employment.
Data released July 2 showed overall employment fell for the first time this year as 225,000 temporary census jobs ended, casting a shadow over the strength of the U.S. economic recovery. Consumer spending accounts for about two-thirds of U.S. economic growth. [ID:nN01165161]
That weakness, combined with the back half of 2009 being “pretty good,” could make the rest of 2010 difficult for retailers, Eshelman said.
“They (June sales) will mask an underlying weakness in consumer spending that will come into sharper focus in the next few months,” he said, adding he did not have high expectations for this year’s back-to-school or holiday selling periods.
Janet Hoffman, global managing director of Accenture’s retail practice, said the American consumer was still very value-conscious.
“(The) consumer is active in the marketplace. They are just spending less on a per-item basis,” Hoffman said.
June is a middling month in terms of sales for retailers, according to National Retail Federation data. July is more important as it kicks off the back-to-school season, the second-biggest sales period of the year after Christmas.
Some retailers are already bracing themselves for a lackluster back-to-school season as consumers, spooked by grim economic data, still exercise caution while spending. [ID:nN25166071]
“We are seeing an improvement, we are not seeing a shift from recovery to expansion at this point,” Michael Niemira, chief economist at the International Council of Shopping Centers said, adding that consumer spending trends were still far away from the glorious days of retail.
The retail sales report card also only captures part of the retail economy, as industry Goliath Wal-Mart Stores Inc (WMT.N) and other major retailers like Best Buy Co Inc (BBY.N) and Amazon.com (AMZN.O) do not report monthly sales. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on U.S. same-store sales:
MANY SHOP WHILE THE SUN SHINES
Warm weather across most parts of the United States should have helped spur sales of summer clothes, footwear, outdoor goods and other items after a lackluster April and May, analysts said.
The trend bodes especially well for teen apparel chains like American Eagle Outfitters Inc (AEO.N) and Aeropostale (ARO.N) as well as the more value-oriented retail players like TJX (TJX.N) and Ross Stores (ROST.O).
“It’s summer … School’s out … The first person the disposable income gets spent on in the family is children,” said Accenture’s Hoffman.
June also typically sees a lot of full-price selling as many retailers wait until July before offering major discounts to clear store shelves for back-to-school merchandise.
AlixPartners’ Eshelman urges retailers to show more willingness to discount “fast and deep,” if required, to drive traffic and make space for the new merchandise.
While most retailers have done a better job of managing their inventories this year, markdowns still help in winning shoppers, he said.
Additionally, demand for food and related products during the Memorial Day weekend in late May should have helped grocers and mass merchants who sell groceries, Accenture’s Hoffman said. (Reporting by Dhanya Skariachan; Editing by Tim Dobbyn)